Consumers should know about auto service contracts
Very few consumers know anything about buying an extended auto warranty. This important consumer product is sold as easily as responding to the fast food question of the day, “Do you want fries with that burger?” The Better Business Bureau hears from a lot of disappointed consumers who have bought extended auto warranties without knowing what kind of coverage they have bought until they use it.
An extended warranty is an agreement between the car owner and a warranty company obligating the warranty company to pay for repairs covered by the contract for a specific period of time. With an extended warranty you are protecting yourself from the unexpected cost of mechanical breakdowns.
There are many reasons to purchase an extended warranty. Your vehicle is one of your biggest consumer investments, and with the complexity of today’s automobiles, one major repair often costs more than the extended warranty.
Do you need an extended warranty?
If you buy a new vehicle, you have a manufacturer’s warranty for a period of time and/or mileage. Why would you want an extended warranty on your new car? Many consider this duplicate coverage, and it is. However, buying an extended warranty after the vehicle has excessive mileage and age will certainly mean that the extended warranty will be more expensive later on.
Do your homework
Know what you’re buying and what is covered in the extended warranty. Does the warranty cover breakdown as well as wear and tear? Under a breakdown warranty coverage is extended only to parts that break. Not all parts fail due to breakage; some need to be replaced because they’ve worn down over a period of time. A wear and tear warranty extends coverage to worn-down parts in need of replacement.
Many consumers are surprised to learn that the extended warranty they have bought does not cover ABS brakes and many of the luxury options common in today’s vehicles. If your vehicle has this feature, you should specifically request a contract with this coverage.
Another surprise for consumers is overheating. Regardless of its cause, overheating is not covered in many warranties. If overheating occurred due to problems with an expensive part, such as your radiator, you’d be stuck with an expensive repair bill.
Know the warranty coverage you buy
• Powertrain Warranty covers the engine, transmission and other parts of the drivetrain only, which is defined as the 29 parts of the vehicle through which oil flows. These are the parts least likely to fail (unless you neglect to maintain oil levels).
• Bumper-to-Bumper Warranty covers nearly all the mechanical systems of the vehicle, from front bumper to back bumper; except for those on the “exclusion list,” listing the parts that are NOT covered by the contract. It’s much easier for a consumer to see a short list of items that are not covered and know that everything else is.
Consumable items like brake pads or windshield wipers are not usually covered. You would want to make sure that roadside assistance plans are offered.
• Named Component Warranty covers the major mechanical systems of the vehicle from the mechanical breakdown and mechanical failure. Review the component list carefully. If the part isn’t listed, it isn’t covered by the contract. These usually include the engine, fuel delivery, front and rear drive axles, brakes, transmission, etc.
• Deductible amount is important and also whether it’s per visit or per repair. What sounds like a minor difference, could have a major impact on your wallet.
•?Where repairs can be performed can be limiting and inconvenient. Some warranties require that repairs be performed at the dealership from which the warranty was purchased. Always look for a warranty that gives you more than one service facility to choose from. You’ll appreciate this if you ever need service while you are on a road trip miles from home.
• Cash layout required for repairs is the biggest surprise for consumers. Some warranties require that you pay the bill, then send the receipt in and wait for reimbursement. The Better Business Bureau has seen some consumers wait months before receiving reimbursement.
• Know who is really behind the warranty. A third-party warranty company or the vehicle’s manufacturer may back an extended warranty. Know who is administering your policy. Administrators act as claims adjusters, authorizing the payment of claims to the service repair facility under the contract. Manufacturer-backed warranties score very high when it comes to ease of use. However, third-party warranties are often less expensive and offer broad coverage.
There are many Web sites offering warranties. Prices vary considerably, as do coverages. Only a few Web sites are direct administrators of the warranties. Remember, it’s the administrator of the warranty who pays your claims. Know who you are doing business with. Check the company out with the Better Business Bureau before you buy. After all, the ultimate measure of a warranty company is ensuring that your claims are paid quickly and easily.